The Institutional Framework of the ECB and the ESCB

When Stage Three of Economic and Monetary Union (EMU) was launched, the national central banks of the EU Member States which have adopted the euro transferred their monetary policy decision-making authority to the Governing Council of the ECB, of which the Governor of the OeNB is a voting member. The ECB, which was established on June 1, 1998, and the national central banks (NCBs) of the EU Member States constitute the European System of Central Banks (ESCB). The independence of the ESCB is enshrined in the Treaty establishing the European Community and in the Statute of the ESCB and the ECB. Neither the ECB nor a central bank nor any member of their decision-making bodies may seek or take instructions from EU institutions or bodies, from any government of a Member State or from any other body.

The national governments and the other institutions and bodies are obligated to respect this principle and to refrain from seeking to exert any influence on the ECB or the NCBs. Furthermore, the Member States were required to ensure that at the beginning of Stage Three of EMU their national legal provisions, including the statutes of the national central banks, safeguarded national central bank independence. The term of office of an NCB governor must be no less than five years.

The tasks of the ESCB and the Eurosystem are laid down in the Treaty establishing the European Community. They are specified in the Statute of the European System of Central Banks (ESCB) and of the European Central Bank (ECB). The Statute is a protocol attached to the Treaty. 

The Treaty text refers to the “ESCB” rather than to the “Eurosystem” since it was drawn up on the premise that eventually all EU Member States will adopt the euro. The term “Eurosystem,” which comprises the ECB and the NCBs of the euro area countries, was adopted to denote the composition in which the ESCB performs its basic tasks.

Basic Tasks

According to Article 105.2 of the Treaty establishing the European Community, the basic tasks of the ESCB are

• to define and implement the monetary policy of the euro area;
• to conduct foreign exchange operations;
• to hold and manage the official foreign reserves of the Member States (see portfolio management);
• to promote the smooth operation of payment systems.      

• Banknotes: The ECB has the exclusive right to authorize the issue of banknotes within the euro area. 
• Statistics: To be able to carry out its tasks, the ECB, assisted by the national central banks to the extent possible, collects statistical data from the competent national authorities or directly from economic agents. 
• Financial Stability and Prudential Supervision of Credit Institutions: The ESCB contributes to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system. 
• International and European Cooperation: In order to perform the tasks entrusted to the Eurosystem, the ECB cooperates with the competent bodies, institutions and fora both within the EU and at the international level.      

“The primary objective of the ESCB shall be to maintain price stability. Without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Community with a view to contributing to the achievement of the objectives of the Community as laid down in Article 2” (Article 105.1 of the Treaty).

The objectives of the Union (Article 2 of the Treaty on European Union) include a high level of employment and sustainable, noninflationary growth.